We cannot escape profound, inevitable trade-offs when it comes to how we use our resources – including when we give them away.

Next time you pay for your groceries at the supermarket, have a look at your till receipt. It is a document more valuable than you might think – an empirical reflection of your preferences. Of all the things that are available and that you could have bought for the amount you spent, that particular combination provides you with the maximum utility. In addition, both spending more and spending less would have reduced that utility: the least useful item in your trolley was still worth more to you than the price tag, but anything more would not have been worth the price to you.

At least, that is what conventional economic theory would make from your receipt. Anyone rationally pursuing their self-interest will have done the necessary calculations to work out, not just which of two pots of jam provides the most utility, but also whether a pot of jam provides more utility than a bag of potatoes.

In practice, of course, pretty much nobody shops that way. We don’t explicitly consider how effectively our money is spent in the supermarket. As long as what we get home is good enough, and meets our most important needs (imagine you stocked up on strawberry jam in promotion so much that you had no money left for toilet paper), overall effectiveness is not really of great concern.

The effect of doing good

The same is not necessarily true for charitable giving. Money we donate literally has the capacity to make a difference between life and death. Should we not be concerned that a pound we give to charity A will save more lives than one given to charity B?

Enter effective altruism, a concept that has gained momentum thanks to the views and activism of philosopher Peter Singer. Singer is perhaps best known for the drowning child thought experiment, first formulated in his paper Famine, Affluence and Morality. It goes something like this: if we walk past a shallow pond in which a small child is drowning, we all have a moral obligation to wade in and save it – even if it would ruin our clothes and shoes. Should we not, therefore, be willing to make an equivalent sacrifice, if it would save the life of a small child thousands of miles away?

The effective altruism movement seeks to channel the resources we are willing to give away in such a way that it produces the biggest bang for the buck. The introduction on the movement’s website shows what $1000 can achieve, depending on how it is used. The objective basis for this is a measure called DALY, Disability-Adjusted Life Year, used by the World Health Organization. One DALY represents the loss year of “healthy” life. Why this qualification? It recognizes that it is more worthwhile to prevent the premature death of a younger and/or healthier person than of an older and/or sicker person.

This is a very clinical, rationalist, accountant-like approach to charity, which meets a fair amount of criticism. BBC radio broadcast a programme on the topic a little while ago (recommended listening, still available on the Radio Player), which explored the objections to effective altruism. For example, altruism is supposed to be an emotional affair, and not like a company board choosing the investment proposal that produces the highest return on investment. Calculating which lives are worth saving – let alone treating older people, or those with a disability differently – feels, well, wrong.

Still feel there is some merit in seeking effectiveness, and making sure your resources are spent such that the world improves the most? How about this thought: is it OK to spend more on your own children who, by any account, already have a vastly better life than children in the most deprived areas of the world? Can you justify getting them a new bike while a few thousands of miles away, children are dying of starvation or malaria?

The science of giving

An interesting recent paper by Jim Everett, a social and moral psychologist at Oxford University, and colleagues, sheds some light on this stark tension. Effective altruism is consequentialist in nature: the moral righteousness of one’s choices is judged by their consequences. This means that the well-being of every individual – your child, or a child in Mali – must be treated the same. Resources should be allocated to strangers, rather than to a family member, if in doing so the total benefit to the strangers would be larger than the benefit to the family member.

It may take more than $2000 to fix, but every little helps (image: photobeppus CC/BY)

The researchers carried out four studies, in which they asked participants to report their perception of a hypothetical protagonist making a strongly consequentialist or non-consequentialist decision in impartiality dilemmas, in which either a close relative or a number of strangers were favoured. The participants were then asked to indicate whether they would see the protagonist as suitable in roles comprising a spouse, a friend, a boss or a political leader. One of the dilemmas featured Janet, an engineer, who spent either a weekend cheering up her lonely mother, or instead helped families rebuild their houses that got damaged in recent flooding. In another one Susan, a grandmother who had won a $2000 prize, and either donated this to a charity providing mosquito nets to families in the developing world to protect them from malaria, or to her grandson so he could fix his car.

The results from the studies suggest that impartial consequentialists would not be popular as a spouse, friend or boss. The researchers conclude that we actually expect partiality from people with whom we want to enter in such a close personal relationship, and are put off by impartiality.

Another recent paper by Jonathan Berman, an economist and marketing professor at the London Business School, and colleagues, looks at what might prevent donating to the most effective cause. The researchers examined various aspects of charitable giving, for example the trade-off between personal preference for a given cause and the consequences on welfare, or how others are judged based on whether they choose an effective or ineffective option.

They found that people consider it to be quite appropriate to be led by subjective preferences, rather than by how much effect a donation will have – even if there are clearly more effective options available. The emotional connection outweighs the amount of good that is done.

Against the current

So it looks as if the effective altruists are swimming against a strong current. We don’t want people who are impartial in the allocation of their resources in our social circle, and we think it is better to support a cause that is close to our heart than one that saves more lives.

And yet, perhaps the argument against effective altruism is largely a straw man argument. Portraying the effective allocation of resources as something that is important in an absolute way, in which every pound, euro or dollar we are about to spend is analysed to death, is a bit disingenuous.

Not all the funds go to life-saving cancer treatment (source: andreas160578)

Consider the trade-offs facing healthcare professionals and policy makers. Given the limited resources available, they are obliged to make economic evaluations. They use a measure closely related to the DALY: the QALY, Quality-Adjusted Life Year. Does that mean that there are no funds available for physiotherapy when you sprain your ankle, because all the money goes to life-saving cancer treatment? Of course not.

Ensuring effectiveness, whether it is in healthcare, in our household budget, or in how we channel our charity, means comparing intelligently – for example two different cancer treatments. We don’t need to compare wine with laundry detergent, but we can choose between Chilean wine and French wine. (This is much like mental accounting, an important behavioural economics concept.) As the philosopher John Gray remarks in the BBC radio programme: we can choose between spending time comforting a dying person, and spending time working so we can donate the money to an effective charity. There is no right answer.

We can decide how much we give to charity, and how much we reserve for our family. And within our charity mental account, we can decide how much we give to dementia research, to supporting the homeless, to fighting parasitic worm infection in the children of the world, and to stray cats.

But within each category, we must choose whether we want to support the cause for which we have a subjective preference, or the one that maximizes the welfare in the world. And if we choose the former, we should be aware of the consequences – whether we are consequentialists or not.